Netgear Inc. (NASDAQ:NTGR) Q3 2018 Earnings Conference Call - Final Transcript

Oct 25, 2018 • 06:00 pm ET

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Netgear Inc. (NASDAQ:NTGR) Q3 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good evening. My name is Josh and I will be your conference operator today. At this time, I would like to welcome everyone to the NETGEAR Third Quarter 2018 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Chris Genualdi, Director of IR, you may begin.

Executive
Chris Genualdi

Thank you, operator. Good afternoon and welcome to NETGEAR's third quarter 2018 financial results conference call. Joining us from the Company are Mr. Patrick Lo, Chairman and CEO, and Mr. Bryan Murray, CFO.

The format of the call will start with a review of the financials for the third quarter provided by Bryan, followed by details and commentary on the business provided by Patrick and finish with fourth quarter of 2018 guidance provided by Bryan. We will then have time for any questions.

If you have not received a copy of today's release, please visit NETGEAR's investor relations website at www.netgear.com.

(Forward-Looking Cautionary Statements)

In addition, several non-GAAP financial measures will be mentioned on this call. A reconciliation of the non-GAAP to GAAP measures can be found in today's press release on our investor relations website.

At this time, I would now like to turn the call over to Mr. Bryan Murray.

Executive
Bryan Murray

Thank you, Christopher. And thank you everyone for joining today's call. Before we begin, I'd like to make a few comments regarding the financial reporting and consolidation. Now that the IPO of Arlo Technologies is complete, third quarter of 2018 results for Arlo Technologies are consolidated into NETGEAR's results with the exception of the portion of the net loss and loss per share attributable to the 15.8% of Arlo's common stock not owned by NETGEAR.

As stated at our Financial Analyst Day in September, we currently intend to distribute our approximate 84.2% ownership position in Arlo to all NETGEAR shareholders by the end of the first quarter of 2019 subject to market conditions and other factors including final approval by NETGEAR's Board of Directors and other customary requirements. Following the distribution Arlo results for all historical periods, including the quarter in which the distribution occurs, will be reclassified into NETGEAR discontinued operations.

Now turning to our quarterly results. Third quarter of 2018 came in above the high end of our guidance driven by the success of Orbi, cable modems and gateways, SMB switches and the Arlo business. Overall NETGEAR net revenue for the third quarter ended September 30, 2018 was $400.6 million which is up 12.7% on a year-over-year basis and up 9.2% on a sequential basis. This is a quarterly net revenue record for NETGEAR.

NETGEAR net revenue by geography once again reflects our continued strength in North America. Net revenue for the Americas was $288.8 million, which is up 18.2% year-over-year and up 11.1% on a sequential basis. EMEA net revenue was $64.9 million, which is up 4.4% year-over-year and down 5.5% on a quarter-over-quarter basis.

The quarter-over-quarter decline in EMEA